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US firm heads for Q1 loss

Musk launches cheaper Tesla but plans to close stores

Tesla store in Edinburgh

Tesla has a store in Multrees Walk, Edinburgh (pic: Terry Murden)


 

Tesla is launching a long-awaited cheaper model but expects to make a further loss and will be closing some of its retail stores.

Chief executive Elon Musk said the company is unlikely to post a profit in the first quarter and will be cutting more jobs.

Mr Musk declined to specify how many stores will be closed or how many employees will be laid off. The company has 378 stores and service locations worldwide, including an outlet in Edinburgh.

In a call with reporters, he said: “Given that there was just a lot happening in Q1, and we’re taking a lot of one-time charges and there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable in Q1, but we do think that profitability in Q2 is likely.”

All other car manufacturers rely on extensive dealer networks, but Mr Musk, who co-founded Tesla in 2003, said: “People want to buy things online.”

Tesla shares were as much as 4% lower in late trading in response to his comments.

Tesla will be reducing its sales and marketing budget, but one motoring analyst said that shifting to online-only ordering will enable Tesla to lower the prices of all its vehicles by an average of about 6%. It will enable the company to deliver the $35,000 (£26,400) version of the Model 3, almost three years after the company began taking orders for the car.

Mike Ramsey, an automotive consultant with researcher Gartner, told the Bloomberg news agency: “Tesla pioneered direct-to-consumer sales, and the stores were always more of an advertising portal than an actual transaction portal.

“Closing the stores themselves is not that crazy; the real issue for Tesla is their service capability.”

The company will wind down many of its stores over the next few months, said Mr Musk. Some of the roughly 130 outlets will remain in high-traffic locations as galleries, showcases and information centres, and others will become service and repair centres.

“There’s no other way for us to achieve the savings required,” the CEO said.



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